Insights & Advice

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Women Baby Boomers are at a Crossroads

This year women, especially, women in their fifties and up, will control the lion’s share of America’s privately-owned wealth. That should be good news to most boomer women, but good news is sometimes deceiving.
For example, according to the National Center for Women and Retirement Research nine out of ten women will be alone and responsible for their own finances at some point in their lives, and 75% of women will be widowed by age 56. Unfortunately, many middle-aged women are ill-prepared for the financial downside of these circumstances.

Some of the financial challenges women face today are unique to Baby Boomers. There is what is called the “sandwich” dilemma, something I have written about in the past (see “Boomer”). Men and women of my age (I’m 60) face the prospect of supporting children far longer than in the past. Our student children are carrying an increasing amount of college financial debt while at the same time earning less in real wages then we did at their age. As a result, it is taking kids longer and longer to become financially independent and leave the homestead. For single, divorced or widowed women having to face their own retirement issues, this can be an enormous burden.

The flip side of that coin is aging parents: those whose golden years have been marred by the twin catastrophes of failing to save enough for retirement, and health care insurance that is woefully inadequate for their needs. Although taking care of parents is nothing new for middle-aged women, parents live longer today, and keeping them alive is a lot more expensive.

As a result, whether you’re a mom, daughter or both under these circumstances, statistics show it is you who will bear the brunt of support at this critical time; when what you should be concentrating on is saving for your own retirement. Instead, Boomer women find both their financial and emotional resources devoted to their roles as parent and/or child. These additional duties can have a substantial impact on their work lives and careers. They may need to quit their job or work part-time in order to manage their care-giving responsibilities which further reduce their ability to save, an qualify for, health care and other benefits.
And speaking of health care coverage, a middle-aged woman who loses or leaves her job (either because of an aging parent or to join her older husband in retirement) can have a difficult time finding coverage again. Consider too that health insurance in this country is largely employer-based. How many women readers are insured right now by their older husband’s employer? Once he retires at age 65, he’s eligible for Medicare but what about you?

The same situation applies to single women under age 65 who, for whatever reasons, retire early. At the very time your healthcare needs will be increasing, you have no coverage. And as we all know, health care costs are high and still climbing. It is not surprising that, on average, older women spend 20% of their income on medical expenses. Since they normally live longer then men, those costs could bankrupt the female Boomer. It is one of the reasons that 87% of poverty stricken elderly Americans are women.

Women also tend to move in and out of the labor market more than men (marriage, children, aging parents etc.). That means fewer years in the workforce and therefore less time in employer-sponsored retirement plans as well as lower Social Security benefits when you retire. Even when women do hold full-time jobs, they are normally paid less than men. Two out of three working women earn less than $30,000/year and nine out of ten earn less than $50,000. Traditionally, half of all women work in relatively low-paid jobs without pensions and when they do get a pension, women retirees receive, on average, about half the benefits of their male counterparts.

Divorce rates, which are over 50% in this country, and widowhood (which is higher) means losing one out of two Social Security payments each month as well as the loss of pension benefits (in the case of divorce) and health care coverage. Having a husband in America today, according to the Center for Retirement Research at Boston College, is the single most important factor in determining the average woman’s economic status in her later years. At the same time, you better hope your husband lives frugally and does not accumulate a lot of debt because when he passes on that debt is your responsibility. Is it any wonder that one in four women are broke within two months of being widowed?

Now that I have your attention, the good news is there is a growing awareness among Boomer women that they need to radically alter their game plan and do it now. Next month I will begin to outline the steps you need to take to avoid becoming one of these depressing statistics down the road. In the meantime, here’s your homework: I want you to get your family’s financial records together, including expenses, sources of income and assets. You will need them when you read my next column.

Posted in A Few Dollars More, Financial Planning